Category Archives: Engineering Sector/Steel and Metals Industry

LIGHT engineering industries form an important sector of the national economy in terms of the number of units, employment and annual turnover. According to Bangladesh Engineering Industry Owners Association (BEIOA), a total of 40,000 such units are producing capital machinery, spare parts of imported machines – new or reconditioned. Their total economic value is claimed to be Tk 20,000 crore a year. The sector reportedly provides employment to some 20 lakh people. According to a recent report, export of light engineering equipment fetched US$220 million and US$189 million in 2007-08 and 2008-09 respectively. But potential of the sector cannot be fully utilised for lack of capital and support survices. In spite of having a large number of experienced technical hands, the sector cannot make innovations as they use age-old machinery. Banks and financial institutions are reportedly less interested to invest in the sector.

Bangladesh depends on foreign countries for costly capital machinery. Local light engineering industries can meet a part of the demand at cheaper prices if the industries are given financial support to produce modern machinery. These industries are already doing a significant part of maintenance works of the existing industries supplying spare parts fabricated locally and thus saving huge foreign exchange. Light engineering industries along with other SMEs are considered engines of industrialisation. They absorb more workforces and can help achieve the goal of poverty reduction.

Bangladesh has hardly any heavy industry. The country with about 30 million unemployed people needs labour intensive industries. Light engineering industries are specially suitable for their high labour intensity, innovativeness and low capital investment. Stakeholders in the sector want the authorities to create a special fund to provide loans at low interest rates. The SME Foundation may extend financial support to them. Policy support for the development of this vital sector would give rich dividends, say experts.

The country’s fast growing ship building industry is likely to see another growth spurt within a year as a number of foreign companies are seeking local partners to develop backward linkage industries.

Ship building owners said joint venture investment are likely to come from Denmark, Germany, France and few other countries that would help reduce the foreign dependence from ship designing to painting to make world class ocean-going vessels.

Officials of Danish Embassy said at least nine Danish entrepreneurs are working on establishing joint ventures to develop deck equipment, windows, generators, hydraulic system and marine electrical equipment.

Besides, some Danish Naval architect firms are also considering to set up design houses to help the Bangladesh shipyards develop their own design for which they spend about 10 per cent of the production cost.

Officials said a good number of German businessmen who visited the country in October also expressed their willingness to enter into joint ventures for setting up heavy tech industries to build engine and generator.

Though most of these deals are at negotiation level, they said, the joint ventures from Germany would help the country double its ship building capacity.

Md Shakhawat Hossain, Managing Director of Western Marine Shipyard, said joint ventures would be a win-win deal as foreign companies business costs will lower and Bangladesh would get home grown supply of allied products thus saving valuable foreign currency.

“This will help reduce production cost and increase value addition of Bangladesh made oceangoing vessels,” he said and added that foreign investment here would increase value addition of the country’s product to 50 per cent which is now 35 per cent.

The country now has some 10 shipyards which have capacity to make trawlers, containers ships, multipurpose vessels, tankers, various types of tugs, patrol boats, passenger vessels seismic vessels and fisheries research vessels.

Morten Siem Lynge, Programme Coordinator of Danish Embassy to Bangladesh told the FE that though the investment would not create big employment, it would help the country get skilled workers and experts of international level.

He said within a short time, memorandum of understanding (MOU) would be signed between a few Danish and Bangladesh companies to start joint ventures in the country.

Shakhawat Hossain said at present the country’s carpentry and electrical industries can support the needs of different sectors other than ship building as they have lack of technology and skill to do so.

“The joint venture deals would ensure technology transfer and building capacity of these companies to carry these carpentry and electric works especially for the growing industry,” he added.

According to a study of Danish Embassy, investment cost in the ship building industry in the country is 15 per cent lower than other ship building nations due to cheaper labour cost.

It shows that the country can supply only 10 per cent components for building exportable ships but its support to the domestic inland and coastal vessels manufacturing is around 40 per cent, most of which are believed to be by small and medium enterprises (SMEs) with low skill and training.

The Danish study says that though cost of labour in ship building is typically around 20-30 per cent of the total ship manufacturing costs, the study says that the value of the local items which is 40 per cent of the total ship cost could accordingly be upgraded to 70 per cent.

Among the 200 shipyards, the country has four shipyards capable to build ocean going small vessels but there are six others which would be able to reach the same category by a year or two.

Sea Resources Ltd and Danish fishing gear company Cosmos Trawl A/S have signed an agreement to set up a netloft joint venture company. The deal marks the third phase of a business-to-business project, supported by Danida.

After one-year trial partnership, the two companies will step into the joint venture, named SRL-Cosmos Trawl Ltd, according to a joint statement released yesterday.

The new company will be based at Ichhanagar/Sardarghat in Chittagong, headed by Lars Jensen of Cosmos as managing director.

A Rouf Chowdhury will be the chairman of the joint venture.

Eirikur H Sigurgeirsson, Cosmos chief technical adviser, who will be stationed in Chittagong from January 2010, will look after day-to-day affairs.

Under the deal, the construction of a new 1,500sqm netloft will start soon. “Meantime, activities will continue from Sea Resources’ current operation alongside Fishers Shipyard,” the statement said.

The products will range from traditional fishing gear to modern and more efficient alternatives such as Cosmos semi-pelagic trawls, high-opening bottom trawls, wide-bodied and multi-rig bottom shrimp trawls and larger mid-water trawls and multi-purpose purse seines.

The joint venture will make import substitutes and open a one-stop shop where all equipment and accessories for modern fishing will be available.

“The new netloft will be state-of-the-art, with all kinds of helping equipment, to improve working conditions and efficiency,” the statement said.

“In addition, all employees will undergo training by Cosmos CTA in modern fishing gear technology, supported by a two-year net maker course developed by the International School of Commercial Fishing Gear Technology in Iceland.”

This will replace fishing method with modern technology transfer.

A general consultancy service for fishing operation will also be offered to all operators, the statement added. Cosmos Trawl is part of the international Hampidjan Group.

“Once the new netloft is fully operational, the joint venture will expand production and service towards regional fishing nations to secure a new stronghold in Asia,” the statement said.

Cosmos Trawl is recognised as Denmark’s largest and oldest net maker company, with large production facilities in both Hirtshals and Skagen, according to the company’s website.

Products by Cosmos Trawl are sold mainly in Scandinavia and the North Atlantic, but the company has clients in Asia, South America and the Far East of Russia.

The cost of building an ocean-going ship in Bangladesh is around 15 per cent less than in any other competitor countries, thanks to the cheap labour here, a study of the Danish Embassy said Monday.

Though the low labour costs cannot stand alone to lower the manufacturing costs, the study said the country might not compete with the countries like China, South Korea, India, Vietnam etc already dominating the secondary chain-supply industry.

According to the Danish study, the existing average labour wage per hour in Bangladesh is around US dollar 1.5, compared to $ 3.0 in a Chinese shipyard, $ 8 in South Korea, $ 16 in Italy and $ 18 in the US.

Bangladesh can supply only 10 per cent of the components required for building an exportable ship, but its support to the domestic inland and coastal vessel manufacturing is around 40 per cent, most of which is believed to be coming from small and medium enterprises (SMEs).

Though the cost of labour in shipbuilding is typically around 20-30 per cent of the total ship manufacturing costs, the study says the value of the local items could easily be raised to 70 per cent.

The productivity rate of Bangladesh is 1.0 with the estimated relative labour rate at 0.5 while the ratio stands at 1: 1.2 in India, 1:1.5 in China, and 6:4 in South Korea.

The Danish Embassy prepared the study on Bangladesh Shipbuilding Sector: Challenges and Business Opportunities prior to the visit of a high profile Danish business delegation, mostly from their shipbuilding industry, to find out joint venture business opportunities in Bangladesh.

The study praised the contribution of the private sector to the sale of international oceangoing ships, which fetched half a million US dollars. It said four shipyard companies have already earned the full capacity of building ships of international standard.

Of the 200 shipyards, the study put Ananda Shipyard, Western Marine, Khulna Shipyard, and Karnaphuly Shipyard in the A category. Besides, Highspeed Shipbuilding and Engineering, Dhaka Dockyard, Narayanganj Engineering, Dockyard and Engineering, Chittagong Dry Dock and Fishers Shipyard have all been placed in the B category, which means these will be ready for constructing oceangoing ships in a year or two.

While inaugurating the event at a city hotel, Commerce Minister Faruk Khan made a clarion call to the investors to take into account the country’s labour class and environment to make the investment fruitful.

He also called upon them to find more and more investment avenues including dredging and said the government has already taken necessary steps to create an investment environment for creating job opportunities for the poor segment of the population.

Danish Ambassdor Einar H Jensen, who led the country’s ship building sector revival by making international standard sea vessels, said Bangladesh’s ocean going ships are now doing well.

He said under the Business2Bussiness programme, 70 Danish companies have joint ventures with Bangladesh, mostly in information and technology.

The function, moderated by the president of Bangladesh Enterprise Institute Farooq Sobhan, was also addressed by Capt ATM Kamal from the local ship

Local consumer electronics giant Walton has aimed at more than doubling its daily production of refrigerators by the end of this year as the company is looking to make its mark in the wider international market.

The wholly Bangladeshi owned company- which is a concern of the local R.B. Group, is planning to increase its daily production output of refrigerator to 2,500 from its present level of around 1000, the company authority said Saturday.

“With the Eid ul Azha in the offing, demand for refrigerators, which is our trademark item, is running high in the local market at the moment” a senior marketing official of Walton told FE.

“However, after the end of the Eid season, we would increase our daily production to 2,500 per day as we are eyeing a number of overseas markets for our export”, said Moudud Parvez Mamun, Marketing Manager of Walton.

The conglomerate says that recent years have seen a boom in sales of its locally manufactured refrigerators in the domestic market and currently a total of 11 various brands of Walton refrigerators are available in the local market.

“We already have talked with dealers from a total of 13 countries around the world and by next year we would begin to export refrigerators in Malaysia and Saudi Arabia” Mamun said, adding “Walton has already shipped a range of its refrigerators to Sudan”.

The company says that the lower price of its products would give them a competitive advantage over other international competitors in the overseas market.

In addition, Walton is also looking to gear up its production of locally manufactured motorcycles by more than three fold, which it has identified as another highly potential market both home and abroad.

“Currently we churn out around 300 motorcycles per day from our factory in Gazipur. But by the beginning of the next year, we aiming to increase it to almost a thousand”, Mamun said.

The Bangladeshi company has recently signed an agreement with the Malaysian auto manufacturer Ageth to set up an automobile plant in its factory premise.

“Now we are hoping to commence the establishment of the plant by December which would ultimately see us manufacturing private cars and other automobiles within the country”, Mamun added.

Apart from the manufacturing of refrigerators and motorcycles, the company also assembles television, washing machine, generator, battery and energy saving lights while in the next summer; it is also planning to market its locally manufactured air conditioners.

R.B. Group- to which Walton is a subsidiary, first started its journey in 1977. The company started manufacturing and assembling electronic products back in 1996 and thus has played a pioneering role in electronics manufacturing in the country.

Meghna Group, one of the country’s largest bicycle manufacturers, Monday said it will launch production of high-end bikes from its new plant this November, company officials said.

The plant, which has been set up at Sreepur in Gazipur, will produce bikes that will be sold between US$ 150 and $250 each.

Currently, Bangladesh’s three leading bicycle manufacturers have been producing bikes priced between $80 and $100 each on an average.

“We’re planning to launch a trial operation soon and we expect to start shipment of the same by February next year,” Mizanur Rahman, chairman of the Meghna Group told the FE.

The plant will manufacture at least 10,000 pieces of bicycles each month employing over 400 workers.

Bangladesh is the fifth largest bicycle exporter in the world and nearly a dozen manufacturing units ship bicycles worth around US$ 100 million a year.

Currently, some of the world’s leading companies, including Raleigh, PCM and Motor and Sports of the UK and Aldi of Holland, Bacht-enkirch Interbike of Germany, M&F De Schee-maeker and Formula Cycling of Belgium are importing bicycles from Bangladesh.

Bangladesh manufactures mountain bikes, city bikes, free styles, trekking, folding, beach cruiser and kid bikes. Industry insiders said the country can export around 2.0 million pieces of bicycles a year.

Major (retd.) Halim Khan, executive director of the Meghna Group said that this plant will open a new era in export of high-end Bangladeshi bikes.

Oct 24 : Owning a new luxury car at an affordable price would no longer be a distant dream for a local buyer with modest income level as state-owned Pragati Industries Ltd (PIL) has taken an initiative to assemble Japanese vehicle manufacturing giant Mitsubishi build Pajero brand jeep and Sedan brand car in its factory.

PIL officials told the news agency that local buyers could purchase such internationally recognized brand superior cars at just half price compared current market rate one has to pay for an imported one.

Apart from helping to bring back past glory of PIL, countrys lone motor vehicle assembling enterprise and a subsidiary of Bangladesh Steel and Engineering Corporation (BSEC), the officials said local vehicle market would witness a revolutionary change if the visionary project is materialized successfully.

PIL officials said, necessary discussion between BSEC and the Mitsubishi company to this effect has been finalized and initial car assembling process would start after signing of an agreement within a month.

As per preliminary estimate, the General Manager (Marketing) of PIL Mustafizur Rahman said, local buyers can purchase a 2500 CC Pajero brand jeep at a cost of Taka 40-45 lakhs instead of current market price of an imported one at Taka 70-80 lakhs while a 1500 CC Sedan car at Taka 12-13 lakhs against Taka 22-24 lakhs for an imported one.

A 4-member team led by BSEC Chairman M Abu Hafiz visited Mitsubishi factory in Thailand in last month to witness for themselves the facility and other technological aspects of the enterprise and had necessary discussion with the officials there to gather knowledge on required technological support for the PIL factory to start assembling Pajero brand jeep and Sedan car.

Earlier, a Japanese team comprising of Mitsubishi company engineers while visiting the PIL factory in July last expressed their satisfaction after witnessing the overall capacity and work atmosphere here.

Managing Director of PIL Engineer Zahiruddin Chowdhury told BSS that bilateral discussion with Mitsubishi authority is at final stage and only the issue of fixing the price of their supplied vehicles parts and PIL assembled cars was still unresolved.

” I am hopeful of settling the issue by October 30 and then we could reach an agreement” Zahiruddin said adding that the PIL would able to provide newly assembled luxury cars to buyers at a price close to a reconditioned one.

He said, the Mitsubishi authority would carry out three times sample test for PIL assembled cars before issuing final clearance for their marketing in Bangladesh market to ensure properly the quality and standard of the products up to its original level.

After signing of agreement, at first, a Mitsubishi company expert team would assemble a car at PIL factory in presence of local engineers and then they would supervise assemble process to be done by local men. Finally, the Japanese experts would physically check a car to be assembled fully by local experts without their help and then the Mitsubishi authority would issue work order in favour of PIL for commercial production if the new product is proved up to the mark.